Analyst Downgrades: Caterpillar Inc., Yelp Inc, and DigitalGlobe Inc

Analysts downwardly revised their ratings on Caterpillar Inc. (CAT), Yelp Inc (YELP), and DigitalGlobe Inc (DGI)

by Alex Eppstein

Published on Sep 24, 2015 at 9:29 AM
Updated on Sep 24, 2015 at 9:31 AM

Analysts are weighing in today on construction equipment giant Caterpillar Inc. (NYSE:CAT), business review site Yelp Inc (NYSE:YELP), and aerospace issue DigitalGlobe Inc (NYSE:DGI). Here's a quick roundup of today's bearish brokerage notes on CAT, YELP, and DGI.

  • CAT is 6.5% lower ahead of the bell -- and headed toward levels not seen since August 2010 -- after Axiom Capital initiated coverage with a "sell" rating. Adding to the bearish bias is a downwardly revised 2015 revenue outlook, and news the company is slashing up to 5,000 jobs by the end of next year. On the charts, the shares have tumbled over 30% year-over-year to $70.20 -- just above their nearly four-year low of $70.16, touched yesterday during the stock's Dow-leading decline. This is hardly the only negative attention Caterpillar Inc. has received. Twelve of 15 analysts have handed out "hold" or worse recommendations, while the stock's Schaeffer's put/call open interest ratio (SOIR) stands at a top-heavy 2.54 -- with short-term put open interest more than doubling call open interest. What's more, this SOIR registers in the put-skewed 94th percentile of its annual range.

  • YELP saw its price target cut to $17.75 from $21.50 at Northland Capital. The downward revision comes amid a brutal year for the shares, which have surrendered nearly 58% to rest at $23.10 -- and are on track to plunge another 2.4% at the open. For some reason -- including takeover speculation -- option traders have been placing bullish bets on Yelp Inc at a rapid-fire rate, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The stock's 10-day call/put volume ratio of 4.01 outstrips over three-quarters of comparable readings from the past year. An unwinding of this optimism could result in headwinds, going forward.

  • DGI has lost one-third of its value in 2015 to trade at $20.65, and yesterday touched a nearly three-year low of $20.60. Lower lows could be forthcoming, considering the shares are pointed 3.2% south in electronic trading, following a downgrade to "neutral" from "overweight" at J.P. Morgan Securities -- which also slashed its price target to $27 from $30. Short sellers are likely to be celebrating this downside momentum. During the two most recent reporting periods, short interest on DigitalGlobe Inc ramped up 20.7%, and now accounts for almost one-tenth of the stock's float. To put that in perspective, at DGI's average daily trading volume, it would take more than two weeks for these bearish bettors to cover their positions.

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